Given the market's aversion for loss-making tech stocks, Brainchip Holdings Ltd (ASX: BRN) shares would likely be given a major boost if the semiconductor company became profitable.
But what are the chances of that happening in 2023?
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Will Brainchip be profitable in 2023?
Unfortunately, it is difficult to say if Brainchip will be profitable this year. However, it seems highly unlikely that it will be profitable any time soon given that it has just diluted shareholders by raising funds through its agreement with alternative investment company LDA Capital.
Brainchip is issuing LDA Capital with 30 million shares (and possibly 10 million more if shareholders approve) at a yet to be determined price.
You would imagine that if it were confident that its sales would grow enough to reach profitability, it wouldn't be seeking these funds.
No broker coverage
Unlike almost all ASX 200 shares, Brainchip doesn't have any coverage by the major brokers.
This could mean that analysts don't believe the company is investment grade.
As well as being a bit of a red flag, it also means investors can't use broker data as a guide for if and when the company achieves profitability.
Big quarterly update coming
In light of the above, investors may want to look out for the company's upcoming quarterly update.
For a couple of quarters, the company has been talking up its sales pipeline. For example, in its last quarterly update, which saw Brainchip report pitiful cash receipts of US$100k, its CEO Sean Hehir commented:
We are seeing the greatest amount of sales activity and engagement in the Company's history […] We remain positive on future market penetration and broad adoption of Brainchip's technology.
Its next update will likely demonstrate whether there is meaningful demand for its technology in a market dominated by tech behemoths and whether it deserves its whopping $1.2 billion market capitalisation.
And with short sellers targeting the company, shareholders will no doubt be hoping Brainchip delivers the goods.
Time will ultimately tell if Brainchip can become profitable and be more than just a meme stock.
